Rights of Lien
The seller of goods has certain rights against the goods and the buyer. As per the right of lien in the Sale of Goods Act, when a seller delivers the goods to the buyer, the buyer promises to pay the amount decided as per the contract. This is a reciprocal promise that forms the consideration for the contract. When the buyer refuses to pay for the goods, the unpaid seller has certain rights against the goods. This is called the right of lien. Let us understand in detail the rights of unpaid seller against goods and what the right of lien means.
Lien is the right of the seller to hold on to the goods until the payment for those goods has been made by the buyer. The right of lien meaning as per Section 47 (1) of the Sale of Goods Act, 1930 is that an unpaid seller in possession of the goods can retain their possession until payment is made by the buyer.
The Rights to Lien are Applicable in the Following Instances:
The seller has sold the goods without any credit stipulation.
The goods have been sold on credit, the term of which has expired.
The buyer of the goods has become insolvent. In this case, the seller can exercise his right of lien even though goods were offered on credit and the credit duration has not expired.
According to Section 47(2), the unpaid seller can exercise his rights of lien while he is in possession of the goods by acting as an agent or bailee for the buyer. This is called possessory lien and can be exercised by the seller as long as he is in possession of the goods.
Lien in Case of Part Delivery of Goods -Section 48
If an unpaid seller has made part delivery of the goods then he can exercise his right of lien on the remainder of the goods. The rights of unpaid seller against the buyer are applicable only when there is no agreement to the contrary for waiving of the lien of the seller in case of part-delivery of goods.
Lien Termination- Section 49(1)
An unpaid seller loses his lien over the goods:
If the goods have been delivered to a carrier for their delivery to the buyer, without reserving the right to dispose of the goods.
When the buyer or his agent gets lawful possession of the goods.
If the rights of lien are waived.
Section 49(2) states that lien rights can also be exercised by the unpaid seller even if he has received a decree for the price of the sold goods.
Right of the Seller Against the Buyer in Stoppage of Goods in Transit
The seller of goods can exercise the right of stoppage of the goods in transit as an extension to the right of lien. He can regain possession of the goods and retain them until the payment is made by the buyer.
According to Section 50, This Right can be Exercised by the Seller:
If the buyer becomes insolvent while the goods are in transit. The seller can ask the carrier to return the goods to him.
The goods are in transit route- The goods are neither with the seller nor with the buyer or his agent. In this case, the goods must be with the carrier who is acting as an intermediary. This carrier must not be an agent of either the seller or the buyer.
Duration of Transit (Section 51)
The duration of transit for goods starts from the time they are delivered to the carrier by the seller for transmission to the buyer or his agent. The transit of goods ends when:
Delivery of the goods is taken by the buyer or his agent before the goods reach the destination.
The carrier informs the buyer or his agent that the goods have reached the destination and are being held by him.
If the buyer refuses the goods and the seller refuses to take them back it is not considered the end of the transit.
If goods are delivered to a ship chartered by the buyer, it needs to be determined if the master is acting as an agent or carrier of the goods.
If the carrier or bailee wrongfully refuses to deliver the goods to the buyer or his agent, it is considered the end of the transit.
If part-delivery of the goods is done, the delivery of the remaining goods can be stopped by the unpaid seller. It is the end of transit for the remaining goods if there is no agreement to give up the possession of all the goods.
Rights of an Unpaid Seller
A person who has sold goods to another person but has not been paid for the goods or been paid partially is called an unpaid seller .According to section 45 of Sale of goods act An unpaid seller is one who has been given a negotiable instrument like a bill of exchange that has been dishonoured .
Rights Against the goods
Rights Against the buyer of goods
Rights Against the Goods (Section 46)
When the buyer has not paid the full or partial price of goods supplied to him , the seller has the following rights with regard to the goods .
Rights of lien
Rights of Stoppage of goods in transit
Right of resale
A. Rights of lien (Section 47-49)
Lien is the right to retain possession of goods until payment in respect of them is paid. According to Section 47 ,if the seller of goods has not been paid and the ownership of goods has been transferred to the buyer but the goods are in the possession of the seller ,the seller has the right to retain the good .
The seller has this right when the goods have not been sold on credit . When the payment has not been made on the promised date and when the buyer has become an insolvent .
Termination of Lien
According to section 49 the lien of an unpaid seller terminates in the following circumstances.
When the seller delivers the goods to a carrier for the purpose of transmission to the buyer .
When the seller has waived his lien on the goods.
B. Rights of Stoppage of Goods in Transit (Section 50-52)
The seller has the right of stoppage of goods in transit in following circumstances :
The seller must be unpaid .
When the goods are in transit.
Duration of Transit - According to Section 51, when the seller has delivered the goods to the carrier for transmission to the buyer , until the goods are received by the buyer or his agent is the duration of transit .
The Carrier may Hold the Goods -
A seller’s agent , In this case , there is no transit because the goods are under the seller’s lien .
As buyer’s agent .In this case the seller cannot exercise his right of stoppage in transit because the buyer has acquired possession
As an independent contractor .In this case the seller has and can exercise the right of stoppage in transit , it is not necessary that the goods should be actually moving .
The Transit Can End if :
If the buyer or his representative obtains delivery of the items prior to their arrival at the agreed-upon location.
If after the arrival of the goods at the appointed destination ,the carrier or other acknowledges to the buyer or his agent that he holds on his behalf.
If the carrier or other party refuses to deliver the goods to the buyer or his representative for any reason.
Rights of Re- sale (Section 54)
A vendor who has not been paid has the right to resell the items. The general criteria for the resale of goods by an unpaid seller are defined in Section 54. The following are the main guidelines:
The unpaid seller may re -sell the goods if the goods are perishable .
When the unpaid seller has acquired the possession of goods by virtue of lien or stoppage in transit and has given notice to the buyer of his intention to re-sell.
FAQs on Rights of an Unpaid Seller Against the Goods
1. What are the rights of an unpaid seller in sale of goods?
An unpaid seller in a sale of goods has specific rights granted by law to protect their interests when the buyer fails to pay. These rights are mainly against the goods themselves and are designed to help the seller recover the money or retain control over the goods. The main rights against goods include:
- Right of lien (to retain possession of goods until full payment is received)
- Right of stoppage in transit (to stop goods in transit if the buyer is insolvent)
- Right of resale (to resell the goods under certain conditions)
These protections ensure that if a buyer defaults, the unpaid seller can minimize losses by either holding, reclaiming, or reselling the goods. Such rights are crucial in commercial transactions to safeguard the seller’s interests.
2. What are an unpaid seller's basic rights?
The basic rights of an unpaid seller arise when a buyer does not pay for the goods as agreed. These rights are classified into two categories: rights against the goods and rights against the buyer personally.
- Rights against goods: lien, stoppage in transit, and resale
- Rights against buyer: suit for price, damages for non-acceptance
Together, these rights enable the unpaid seller to either secure payment, recover damages, or regain possession of the goods. They form a vital part of the legal framework protecting sellers in commercial sales under the Sale of Goods Act.
3. Can an unpaid seller reclaim goods?
Yes, an unpaid seller has the right to reclaim goods under certain conditions. This is primarily through the right of stoppage in transit. If the goods have been shipped but not yet delivered to the buyer and the buyer becomes insolvent, the seller can stop the goods mid-transit and retake possession.
This right exists only if:
- The seller has parted with possession but not yet delivered to the buyer
- The buyer is insolvent
Reclaiming goods under these circumstances protects the unpaid seller from loss due to a buyer's inability to pay. It is a key protection in the rights of unpaid seller against goods.
4. Can an unpaid seller sue for the price?
An unpaid seller can sue for the price of goods if the property in the goods has passed to the buyer and the buyer wrongfully refuses to pay. This right allows the seller to seek legal remedy by filing a suit to recover the agreed price.
The right to sue arises when:
- Goods have been delivered and ownership transferred
- The buyer fails or refuses to pay as agreed in the contract
This legal action ensures the unpaid seller can enforce payment in court, strengthening the seller’s position in commercial contracts involving sale of goods.
5. What is the right of lien in the context of an unpaid seller?
The right of lien allows an unpaid seller to retain possession of the goods until payment is made by the buyer. This right is available when the goods are still in the seller’s possession and the payment due has not been received.
The right of lien applies under these situations:
- No credit was agreed upon and payment was not made
- The term of credit has expired
- The buyer becomes insolvent
By using the right of lien, an unpaid seller can withhold delivery, securing leverage until the buyer pays the agreed amount. This is a fundamental right protecting sellers in the sale of goods.
6. When can an unpaid seller exercise the right of stoppage in transit?
An unpaid seller can exercise the right of stoppage in transit when the buyer becomes insolvent after the goods have been dispatched but before they reach the buyer. This allows the seller to take back possession from the carrier or bailee who has the goods in transit.
- Goods must be in transit (not in the buyer’s possession yet)
- Buyer is proven insolvent
This right is important for protecting sellers when the risk of non-payment becomes apparent after shipment. It helps recover goods before delivery in case of buyer insolvency.
7. Under what circumstances can an unpaid seller resell the goods?
An unpaid seller may resell the goods if the buyer has defaulted on payment and the right of resale has arisen. Usually, the seller can resell when the goods are perishable, after giving notice to the buyer of the intention to resell, or if the buyer fails to pay within a reasonable time.
- Goods are perishable and require quick action
- Notice has been given to the buyer
- Buyer does not pay after notice
The right of resale enables the seller to mitigate losses and recover dues by selling the goods to a new buyer. This ensures the seller is not left unpaid indefinitely.
8. What personal remedies does an unpaid seller have against the buyer?
In addition to rights against goods, an unpaid seller holds personal remedies against the buyer under the Sale of Goods Act. If the contract has been breached, the seller can sue the buyer for the price of goods or for damages for non-acceptance of goods.
- Suing for the price when ownership has transferred but payment is unpaid
- Suing for damages if the buyer wrongfully refuses to accept and pay for the goods
These remedies provide legal recourse to help the seller recover the amount due or losses suffered due to the buyer’s default. They reinforce the seller’s rights in credit sales transactions.
9. How does the right of resale protect an unpaid seller?
The right of resale is a critical right for an unpaid seller, giving them the authority to sell goods to a new buyer if the original buyer defaults or fails to pay. This right, especially relevant in the case of perishable items, ensures that the seller can quickly recover value and prevent further loss.
By exercising this right, the unpaid seller:
- Minimizes financial loss by converting goods to cash
- Avoids the risk of goods losing value or becoming unsellable
The right of resale serves as a strong leverage for the seller and acts as a deterrent against buyer default, maintaining fairness in commercial transactions.
10. What happens to goods after an unpaid seller exercises the right of lien?
After an unpaid seller exercises the right of lien, the seller retains possession of the goods until the buyer pays the outstanding amount. The goods remain under the seller’s control and cannot be claimed by the buyer or any third party unless payment is settled.
If the buyer still fails to pay, the seller may proceed to resell the goods after proper notice. This step provides the seller an opportunity to recover the unpaid amount through a new transaction. The right of lien is thus a powerful protection until the financial obligation is met.
11. Does the unpaid seller's right of lien end in any circumstance?
Yes, the unpaid seller’s right of lien is not absolute and can end under certain circumstances. If the seller hands over the goods to a carrier for delivery without reserving the right of disposal, or if the buyer or an authorized agent lawfully obtains possession, the lien is lost.
The lien also ends if:
- The seller waives the right voluntarily
- The buyer pays or tenders the price
Once the right of lien ends, the seller cannot retain or reclaim the goods on the ground of non-payment. Thus, this right is time-sensitive and linked to possession.
